Investment Advice & Risk

Apr 27, 2016

6:31 AM America/Chicago

A current topic that is floating around the retirement planning industry is the new DOL rule. The goal of the rule is to protect the savings of investors going into retirement by expanding the types of retirement investment advice covered by fiduciary protections.

The Department of Labor feels that many loopholes exist in the definition of retirement investment advice under the outdated DOL rules. They feel that this exposes many middle class families, especially IRA owners, to advice that may not be in their best interest. Under the DOLs proposed definition, any individual receiving compensation for providing advice that is individualized or specifically directed to a particular plan sponsor (an employer with a retirement plan), plan participant, or IRA owner for consideration in making a retirement investment decision is a fiduciary. Being a fiduciary simply means that the adviser must provide impartial advice in their clients best interest and cannot accept any payments creating conflicts of interest unless they qualify for an exemption intended to assure that the customer is adequately protected.

What you, the investor, can expect from firms in compliance with the new rules

Commits the firm and adviser to providing advice in the client’s best interest. Committing to a best interest standard requires the adviser and the company to act with care, skill, prudence, and diligence that a prudent person would exercise based on the current circumstances. In addition the firm and the adviser must avoid misleading statements about fees and conflicts of interest.

Warrants that the firm has adopted policies and procedures designed to mitigate conflicts of interest. Specifically, the firm must warrant that is has identified material conflicts of interest and compensation structures that encourage individual advisers to make recommendations that are not in the clients best interest and has adopted measures to mitigate any harmful impact on savers from those conflicts of interest. Under the new rules, adviser will be able to continue receiving common forms of compensation.

Clearly and prominently disclose any conflicts of interest, like hidden fees often buried in the fine print or backdoor payments, that might prevent the adviser from providing advice in the client’s best interest. The contract must also direct the customer to a webpage disclosing the compensation arrangements entered into by the adviser and the firm and make customers aware of their right to complete information on the fees charged.

Here at Baird, our mission is as follows

“To provide the best financial advice and service to our clients and be the best place to work for our associates”

“…Honesty in our business dealings and integrity in everything we do” -Robert W. Baird

It is our belief and our practice to put the best interest of the client ahead of the firm’s interest. We believe that good business practices perpetuates a successful business, not hidden fees, backdoor payments, or get rich quick schemes.

As a current client, you can expect the same level of diligence and care that you have already experienced, if any changes need to be made to your current portfolio to comply with the rules, we will work with you to reorganize your portfolio.

As a potential future client, we encourage you to get in touch with an adviser to get more information on what your retirement portfolio should look like and how we can help you reach your retirement goals.

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Robert W. Baird & Co. Incorporated

P.O. Box 0672

Milwaukee, WI 53201-0672

Baird Retirement Management

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